Revenue

6 Months Ended

Jun. 30, 2019

Revenue Recognition and Deferred Revenue [Abstract]

Revenue

e offer a diversified portfolio of products which allows us to capitalize on local and regional customer needs. Generally, our products are promoted to veterinarians and livestock producers by our sales organization which includes sales representatives and technical and veterinary operations specialists, and then sold directly by us or through distributors. The depth of our product portfolio enables us to address the varying needs of customers in different species and geographies. Many of our top selling product lines are distributed across both of our operating segments, leveraging our research and development (R&D) operations and manufacturing and supply chain network.

Over the course of our history, we have focused on developing a diverse portfolio of animal health products, including medicines, vaccines and diagnostics, complemented by biodevices, genetic tests and a range of services. We refer to a single product in all brands, or its dosage forms for all species, as a product line. We have approximately 300 comprehensive product lines, including products for both livestock and companion animals across each of our major product categories.

In the third quarter of 2018, the company modified the list of major product categories to include a category for animal health diagnostics, which was previously included within other non-pharmaceutical products. The prior period presentation has been revised to reflect the new product categories.

Our major product categories are:

• vaccines: biological preparations that help prevent diseases of the respiratory, gastrointestinal and reproductive tracts or induce a specific immune response;

• other pharmaceutical products: allergy and dermatology, pain and sedation, antiemetic, reproductive, and oncology products;

• anti-infectives: products that prevent, kill or slow the growth of bacteria, fungi or protozoa;

• parasiticides: products that prevent or eliminate external and internal parasites such as fleas, ticks and worms;

• medicated feed additives: products added to animal feed that provide medicines to livestock; and

• animal health diagnostics: portable blood and urine analysis systems and point-of-care diagnostic products, including instruments and reagents, rapid immunoassay tests, reference laboratory kits and blood glucose monitors.

Our remaining revenue is derived from other non-pharmaceutical product categories, such as nutritionals and agribusiness, as well as products and services in complementary areas, including biodevices and genetic tests.

Our livestock products primarily help prevent or treat diseases and conditions to enable the cost-effective production of safe, high-quality animal protein. Human population growth and increasing standards of living are important long-term growth drivers for our livestock products in three major ways. First, population growth and increasing standards of living drive increased demand for improved nutrition, particularly animal protein. Second, population growth leads to increased natural resource constraints driving a need for enhanced productivity. Finally, as standards of living improve, there is increased focus on food quality and safety.

Our companion animal products help extend and improve the quality of life for pets; increase convenience and compliance for pet owners; and help veterinarians improve the quality of their care and the efficiency of their businesses. Growth in the companion animal medicines, vaccines and diagnostics sector is driven by economic development, related increases in disposable income and increases in pet ownership and spending on pet care. Companion animals are also living longer, receiving increased medical treatment and benefiting from advances in animal health medicines and vaccines.

The following tables present our revenue disaggregated by geographic area, species, and major product category.

Revenue by geographic area

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2019		2018		2019		2018
United States	$	780	$	677	$	1,498	$	1,311
Australia	49		51		97		99
Brazil	74		68		134		138
Canada	54		56		95		96
China	56		60		116		124
France	27		30		59		63
Germany	39		38		76		76
Italy	28		26		56		53
Japan	41		39		78		80
Mexico	30		26		58		50
Spain	30		30		57		55
United Kingdom	42		36		99		88
Other developed markets	88		89		172		168
Other emerging markets	184		179		363		364
	1,522		1,405		2,958		2,765
Contract manufacturing & human health diagnostics	25		10		44		16
Total Revenue	$	1,547	$	1,415	$	3,002	$	2,781

Revenue by major species

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2019		2018		2019		2018
U.S.
Livestock	$	280	$	271	$	553	$	563
Companion animal	500		406		945		748
	780		677		1,498		1,311
International
Livestock	444		463		878		941
Companion animal	298		265		582		513
	742		728		1,460		1,454
Contract manufacturing & human health diagnostics	25		10		44		16
Total Revenue	$	1,547	$	1,415	$	3,002	$	2,781

Revenue by species

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2019		2018		2019		2018
Livestock:
Cattle	$	379	$	396	$	759	$	812
Swine	158		165		307		340
Poultry	143		129		282		265
Fish	25		24		48		46
Other	19		20		35		41
	724		734		1,431		1,504
Companion Animal:
Dogs and Cats	754		630		1,442		1,179
Horses	44		41		85		82
	798		671		1,527		1,261
Contract manufacturing & human health diagnostics	25		10		44		16
Total Revenue	$	1,547	$	1,415	$	3,002	$	2,781

Revenue by major product category

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(MILLIONS OF DOLLARS)	2019		2018		2019		2018
Vaccines	$	370	$	371	$	728	$	727
Other pharmaceuticals	372		337		721		656
Anti-infectives	293		286		579		583
Parasiticides	266		245		497		436
Medicated feed additives	115		114		227		251
Animal health diagnostics	65		12		125		23
Other non-pharmaceuticals	41		40		81		89
	1,522		1,405		2,958		2,765
Contract manufacturing & human health diagnostics	25		10		44		16
Total Revenue	$	1,547	$	1,415	$	3,002	$	2,781

B. Revenue from Contracts with Customers

Contract liabilities reflected within Other current liabilities as of December 31, 2018 and December 31, 2017, and subsequently recognized as revenue during the first six months of 2019 and 2018 were approximately $4 million and $2 million, respectively. Contract liabilities as of June 30, 2019 and December 31, 2018 were approximately $11 million and $9 million, respectively.

Estimated future revenue expected to be generated from long-term contracts with unsatisfied performance obligations as of June 30, 2019 is not material.